Student Loans on Low Income

The repayment threshold is the minimum income level at which you start making student loan repayments. If you earn below this amount, you make no repayments at all—and there's no penalty or impact on your credit score for this.

Example: Plan 2 on £25,000

If you're on Plan 2 (threshold £27,295) and earning £25,000:

• You earn £2,295 below the threshold
• Your monthly repayment: £0
• Your annual repayment: £0

Example: Plan 2 on £30,000

If you're on Plan 2 (threshold £27,295) and earning £30,000:

• You earn £2,705 above the threshold
• You repay 9% of £2,705 = £243.45 per year
• Monthly repayment: approximately £20

As you can see, even earning above the threshold doesn't mean large repayments when your income is modest. The system is designed to be proportional and affordable.

If your income is below the repayment threshold, several important protections apply:

Zero Repayments Required

You make absolutely no repayments through your salary. Your employer won't deduct anything for student loans from your paycheck if you're below the threshold.

Interest Still Accrues

While you don't repay, interest continues to be added to your loan balance. The interest rate depends on your loan plan:

• Plan 1 and Plan 4: Lower of RPI or Bank Base Rate +1% (currently 1.75%)
• Plan 2: RPI only when earning below £27,295 (currently 4.3%)
• Plan 5: RPI only (currently 4.3%)
• Postgraduate Loan: RPI+3% (currently 7.3%)

No Credit Impact

Student loans don't appear on your credit file, and not making repayments because you're below the threshold has zero impact on your credit score or ability to get mortgages, credit cards, or other loans.

Eventual Write-Off

After a set period, your loan is written off regardless of the outstanding balance:

• Plan 1: 25 years after you became eligible to repay (or at age 65, whichever comes first)
• Plan 2: 30 years after you became eligible to repay
• Plan 4: 30 years after you became eligible to repay
• Plan 5: 40 years after you became eligible to repay
• Postgraduate Loan: 30 years after you became eligible to repay

Many graduates on persistently low incomes never repay their loans in full, with the outstanding balance written off at the end of the repayment period.

If you work part-time or have variable income, understanding how repayments work becomes especially important:

Part-Time Employment

Student loan repayments are based on your annual income, but deducted through your paycheck if you're employed. For part-time workers:

• Your employer estimates your annual income based on your current pay period
• If your part-time income is below the annual threshold, no deductions should be made
• If you work variable hours, some months you might have deductions and others you might not

Multiple Jobs

Each employer assesses your income separately, which can sometimes mean:

• You might not have deductions from either job if each pays below the monthly threshold
• Even if your combined income exceeds the annual threshold, automatic deductions might not occur
• You may need to contact the Student Loans Company to arrange payment if your total income exceeds the threshold

Self-Employment

If you're self-employed with low income:

• Repayments are calculated through Self Assessment based on your annual profit
• If your profit is below the threshold, you owe nothing
• You can defer your Self Assessment payment on account if your income fluctuates

Overpayment Refunds

If your employer deducts student loan repayments but your annual income ends up below the threshold, you can claim a refund from the Student Loans Company. Keep your payslips and P60 as evidence.

Being on a low income with a student loan doesn't mean you're without support. Several options can help:

Universal Credit and Benefits

Student loan repayments are calculated on your gross income before they're deducted, but most benefits calculations use your net (take-home) income:

• Student loans don't count as debt when claiming benefits
• Small student loan deductions won't significantly affect benefit calculations
• You can claim Universal Credit even while working and repaying student loans

Should You Make Voluntary Repayments?

For most people on low incomes, the answer is no:

• You may never repay in full: If you remain on a low income, your loan will likely be written off before you repay it completely
• Other priorities matter more: Emergency savings, essential expenses, and quality of life should come first
• No credit benefit: Paying off your student loan early doesn't improve your credit score
• Interest is manageable: For Plan 1 and Plan 4, interest rates are very low (currently 1.75%)

Financial Priorities on Low Income

If you have any spare income, consider these priorities before voluntary student loan repayments:

1. Build an emergency fund of 3-6 months' essential expenses
2. Pay off high-interest debt (credit cards, payday loans)
3. Contribute to workplace pension if your employer matches contributions
4. Save for specific goals (house deposit, education, career development)
5. Only then consider voluntary student loan repayments

Income Increases

When your income increases, your repayments automatically adjust. There's no need to contact anyone—your employer will update your deductions based on your new salary. The system is designed to grow with your income, keeping repayments affordable at every stage.